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Mail Stop 6010
March 29, 2006
Via U.S. Mail and Facsimile to (949) 366-8368
Francis J. O`Brien
Chief Financial Officer
ICU Medical, Inc.
951 Calle Amanecer
San Clemente, CA 92673
Re: ICU Medical, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2005
Filed March 10, 2006
File No. 000-19974
Dear Mr. O`Brien:
We have reviewed your filing and have the following
comments.
We have limited our review of your filing to those issues we have
addressed in our comments. In some of our comments, we may ask
you
to provide us with information so we may better understand your
disclosure. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for the Fiscal Year Ended December 30, 2005
Item 7. Management`s Discussion and Analysis of Financial
Considition
and Results of Operations, page 26
Liquidity and Capital Resources, page 33
1. We note your discussion on pages 28 and 35, that you are
committed
to fund research and development of new products for future sale
to
Hospira and to provide sales specialist focused on critical care.
Please revise future MD&A to quantify the commitment under the
MCDA
and disclose the anticipated source of funds to fulfill such
commitment.
Item 8. Financial Statements and Supplementary Data, page 37
Consolidated Statements of Cash Flows, page 43
2. We note your presentation of a subtotal in the operating
activities portion of the statement of cash flows which excludes
the
tax benefits from the exercise of stock options. Please revise
future filings to remove this subtotal or alternatively, explain
your
basis for presenting and refer to the authoritative literature
that
supports your presentation.
3. Please refer to the line-item "advances under finance loans"
and
"proceeds from finance loan repayments" included as cash flow from
investing activities. Please tell us the nature of the amounts
included in these captions. In addition, quantify the portion of
the
net change in these loan receivables that were for amounts due
from
your distributors. Tell us the consideration given to classifying
these amounts as a component of operating cash flow (i.e. with the
related income from the sale). We may have further comment based
on
your response.
Note 1. Summary of Significant Accounting Policies, page 44
k. Revenue Recognition, page 46
4. Please tell us whether you have any repurchase obligations
under
your agreements with Hospira. Also, tell us the significant terms
of
the agreements, including payment, rights of return, exchange,
price
protection and other significant matters. We specifically refer to
your disclosure that customers do not have the right of return
"with
certain exceptions." Explain and support why it is appropriate to
recognize revenue to distributors at the time of shipment. Refer
to
SAB 104 and SFAS 48 as necessary in your response. Please revise
future filings to clarify.
5. We also see the disclosure that you have revenue sharing
agreements. Please tell us more about these agreements, including
with whom there are signed, the basic terms, the products and
services covered, the portion of revenues to which you are
entitled
to and your responsibilities under the agreements. Please also
expand
future filings to include additional details of these agreements,
if
material.
Note 2. Asset Purchase, page 48
6. We note that as part of the purchase of certain assets from
Hospira, you signed a twenty year Manufacturing, Commercialization
and Development Agreement and recorded an intangible asset of $8.9
million with a useful life of ten years. With respect to this
agreement, please address the following:
* Revise future filings to clarify that you entered into a
Manufacturing, Commercialization and Development Agreement, not a
Manufacturing, Commercialization and Distribution Agreement as
noted
on pages 1 and 45. Confirm that there is no distribution agreement
and ICU does not have any sales, marketing, and distribution
rights
under this agreement.
* Tell us how you valued the intangible asset, including the
significant assumptions and model used.
* Explain how you determined the useful life of ten years was
appropriate, given that after five years, the agreement is no
longer
exclusive and Hospira may have the products manufactured by other
companies. Refer to paragraph 11 of SFAS 142 and EITF 03-09 in
your
response.
We may have further comment after reviewing your response.
7. As a related matter, confirm that none of Hospira`s officers,
directors or 10% or greater shareholders has any ownership in ICU
and
that Hospira is not otherwise considered a related party, as
defined
by SFAS 57.
Note 3. Acquisitions, page 49
8. We note that you attribute the valuation of the purchased in-
process research and development to an independent appraisal.
Please note that if you elect to continue to reference the
independent appraisal in your Form 10-K, you will be required to
identify the valuation firm under "Experts" and include their
consent
in the filing.
Alternatively, you may revise future filing to clearly disclose
that
management is primarily responsible for determining the fair
value.
We will not object if you wish to state, in revised disclosure,
that
management considered a number of factors, including an
independent
valuation and appraisals. Please revise future filings to comply.
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Kevin Kuhar, Staff Accountant, at (202) 551-
3662 or me at (202) 551-3554 if you have questions regarding these
comments on the financial statements and related matters. In this
regard, do not hesitate to contact Martin James, Senior Assistant
Chief Accountant, at (202) 551-3671.
Sincerely,
Angela Crane
Branch Chief
Francis J. O'Brien
ICU Medical, Inc.
March 29, 2006
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